Memo

An act to amend the insurance law, in relation to prior approval of health insurance premium rates

PURPOSE:

This bill authorizes the State Insurance Department to approve health insurance premium rate adjustments before they take effect.

SUMMARY OF PROVISIONS:

This bill establishes a process and timeframe for the Insurance Department to prior approve changes in health insurance premiums before they become effective. The process includes public notification of requested premium rate adjustments, the opportunity for public comment and public notification of the final premium determination.

Under the provisions of the bill, the Superintendent of Insurance is required to render a final determination on a proposed health insurance premium adjustment within 60 days or it is deemed effective. In instances where the Superintendent requires additional information to render his decision, the bill provides a maximum of 20 additional days for a final determination to be made.

Enactment of this bill is necessary to achieve $70 million in savings in 2010-11 by controlling inappropriate health insurance premium increases and reducing the number of uninsured individuals that will migrate to public health insurance programs.

EFFECTIVE DATE:

Immediately.

Text

IN SENATE -- Introduced by COMMITTEE ON RULES -- (at request of the
Governor) -- read twice and ordered printed, and when printed to be
committed to the Committee on Finance
IN ASSEMBLY -- Introduced by COMMITTEE ON RULES -- (at request of the
Governor) -- read once and referred to the Committee on Ways and Means
AN ACT to amend the insurance law, in relation to prior approval of
health insurance premium rates
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subsection (e) of section 3231 of the insurance law, as
added by chapter 501 of the laws of 1992, subparagraph (B) of paragraph
2 as amended by chapter 237 of the laws of 2009, is amended to read as
follows:
(e) (1) (A) An insurer desiring to increase or decrease premiums
[after April first, nineteen hundred ninety-three] for any policy form
subject to this section shall submit a rate filing or application to the
superintendent.
AN INSURER SHALL SEND WRITTEN NOTICE OF THE PROPOSED RATE ADJUSTMENT,
INCLUDING THE SPECIFIC CHANGE REQUESTED, TO EACH POLICY HOLDER AND
CERTIFICATE HOLDER AFFECTED BY THE ADJUSTMENT ON OR BEFORE THE DATE THE
RATE FILING OR APPLICATION IS SUBMITTED TO THE SUPERINTENDENT. THE
NOTICE SHALL PROMINENTLY INCLUDE MAILING AND WEBSITE ADDRESSES FOR BOTH
THE INSURANCE DEPARTMENT AND THE INSURER THROUGH WHICH A PERSON MAY,
WITHIN THIRTY DAYS FROM THE DATE THE RATE FILING OR APPLICATION IS
SUBMITTED TO THE SUPERINTENDENT, CONTACT THE INSURANCE DEPARTMENT OR
INSURER TO RECEIVE ADDITIONAL INFORMATION OR TO SUBMIT WRITTEN COMMENTS
TO THE INSURANCE DEPARTMENT ON THE RATE FILING OR APPLICATION. THE
SUPERINTENDENT SHALL ESTABLISH A PROCESS TO POST ON THE DEPARTMENT'S
WEBSITE, IN A TIMELY MANNER, ALL RELEVANT WRITTEN COMMENTS RECEIVED
PERTAINING TO RATE FILINGS OR APPLICATIONS. THE INSURER SHALL PROVIDE A
COPY OF THE NOTICE TO THE SUPERINTENDENT WITH THE RATE FILING OR APPLI-
CATION. THE SUPERINTENDENT SHALL IMMEDIATELY CAUSE THE NOTICE TO BE
POSTED ON THE INSURANCE DEPARTMENT'S WEBSITE. The superintendent shall

EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD12267-01-0

S. 8088 2 A. 11369

determine whether the filing or application shall become effective as
filed, shall become effective as modified, or shall be disapproved. THE
SUPERINTENDENT MAY MODIFY OR DISAPPROVE THE RATE FILING OR APPLICATION
IF THE SUPERINTENDENT FINDS THAT THE PREMIUMS ARE UNREASONABLE, EXCES-
SIVE, INADEQUATE, OR UNFAIRLY DISCRIMINATORY, AND MAY CONSIDER THE
FINANCIAL CONDITION OF THE INSURER WHEN APPROVING, MODIFYING OR DISAP-
PROVING ANY PREMIUM ADJUSTMENT. THE DETERMINATION OF THE SUPERINTENDENT
SHALL BE SUPPORTED BY SOUND ACTUARIAL ASSUMPTIONS AND METHODS, AND SHALL
BE RENDERED IN WRITING BETWEEN THIRTY AND SIXTY DAYS FROM THE DATE THE
RATE FILING OR APPLICATION IS SUBMITTED TO THE SUPERINTENDENT. SHOULD
THE SUPERINTENDENT REQUIRE ADDITIONAL INFORMATION FROM THE INSURER IN
ORDER TO MAKE A DETERMINATION, THE SUPERINTENDENT SHALL REQUIRE THE
INSURER TO FURNISH SUCH INFORMATION, AND IN SUCH EVENT, THE SIXTY DAYS
SHALL BE TOLLED AND SHALL RESUME AS OF THE DATE THE INSURER FURNISHES
THE INFORMATION TO THE SUPERINTENDENT. IF THE SUPERINTENDENT REQUESTS
ADDITIONAL INFORMATION LESS THAN TEN DAYS FROM THE EXPIRATION OF THE
SIXTY DAYS (EXCLUSIVE OF TOLLING), THE SUPERINTENDENT MAY EXTEND THE
SIXTY DAY PERIOD AN ADDITIONAL TWENTY DAYS TO MAKE A DETERMINATION. THE
APPLICATION OR RATE FILING WILL BE DEEMED APPROVED IF A DETERMINATION IS
NOT RENDERED WITHIN THE TIME ALLOTTED UNDER THIS SECTION. AN INSURER
SHALL NOT IMPLEMENT A RATE ADJUSTMENT UNLESS THE INSURER PROVIDES AT
LEAST SIXTY DAYS ADVANCE WRITTEN NOTICE OF THE PREMIUM RATE ADJUSTMENT
APPROVED BY THE SUPERINTENDENT TO EACH POLICY HOLDER AND CERTIFICATE
HOLDER AFFECTED BY THE RATE ADJUSTMENT.
(B) THE EXPECTED MINIMUM LOSS RATIO FOR A POLICY FORM SUBJECT TO THIS
SECTION, FOR WHICH A RATE FILING OR APPLICATION IS MADE PURSUANT TO THIS
PARAGRAPH, OTHER THAN A MEDICARE SUPPLEMENTAL INSURANCE POLICY, OR, WITH
THE APPROVAL OF THE SUPERINTENDENT, AN AGGREGATION OF POLICY FORMS THAT
ARE COMBINED INTO ONE COMMUNITY RATING EXPERIENCE POOL AND RATED
CONSISTENT WITH COMMUNITY RATING REQUIREMENTS, SHALL NOT BE LESS THAN
EIGHTY-TWO PERCENT. IN REVIEWING A RATE FILING OR APPLICATION, THE
SUPERINTENDENT MAY MODIFY THE EIGHTY-TWO PERCENT EXPECTED MINIMUM LOSS
RATIO REQUIREMENT IF THE SUPERINTENDENT DETERMINES THE MODIFICATION TO
BE IN THE INTERESTS OF THE PEOPLE OF THIS STATE OR IF THE SUPERINTENDENT
DETERMINES THAT A MODIFICATION IS NECESSARY TO MAINTAIN INSURER SOLVEN-
CY. NO LATER THAN JUNE THIRTIETH OF EACH YEAR, EVERY INSURER SUBJECT TO
THIS SUBPARAGRAPH SHALL ANNUALLY REPORT THE ACTUAL LOSS RATIO FOR THE
PREVIOUS CALENDAR YEAR IN A FORMAT ACCEPTABLE TO THE SUPERINTENDENT. IF
AN EXPECTED LOSS RATIO IS NOT MET, THE SUPERINTENDENT MAY DIRECT THE
INSURER TO TAKE CORRECTIVE ACTION, WHICH MAY INCLUDE THE SUBMISSION OF A
RATE FILING TO REDUCE FUTURE PREMIUMS, OR TO ISSUE DIVIDENDS, PREMIUM
REFUNDS OR CREDITS, OR ANY COMBINATION OF THESE.
(2) (A) [Beginning October first, nineteen hundred ninety-four] UNTIL
SEPTEMBER THIRTIETH, TWO THOUSAND TEN, as an alternate procedure to the
requirements of paragraph one of this subsection, an insurer desiring to
increase or decrease premiums for any policy form subject to this
section may instead submit a rate filing or application to the super-
intendent and such application or filing shall be deemed approved,
provided that: (i) the anticipated minimum loss ratio for a policy form
shall not be less than [seventy-five] EIGHTY-TWO percent of the premi-
um[,]; and (ii) the insurer submits, as part of such filing, a certif-
ication by a member of the American Academy of Actuaries or other indi-
vidual acceptable to the superintendent that the insurer is in
compliance with the provisions of this paragraph, based upon that
person's examination, including a review of the appropriate records and
of the actuarial assumptions and methods used by the insurer in estab-

S. 8088 3 A. 11369

lishing premium rates for policy forms subject to this section. AN
INSURER SHALL NOT UTILIZE THE ALTERNATE PROCEDURE PURSUANT TO THIS PARA-
GRAPH TO IMPLEMENT A CHANGE IN RATES TO BE EFFECTIVE ON OR AFTER OCTOBER
FIRST, TWO THOUSAND TEN.
(B) Each calendar year, an insurer shall return, in the form of aggre-
gate benefits for each policy form filed pursuant to the alternate
procedure set forth in this paragraph at least [seventy-five] EIGHTY-TWO
percent of the aggregate premiums collected for the policy form during
that calendar year. Insurers shall annually report, no later than [May
first] JUNE THIRTIETH of each year, the loss ratio calculated pursuant
to this paragraph for each such policy form for the previous calendar
year. In each case where the loss ratio for a policy form fails to
comply with the [seventy-five] EIGHTY-TWO percent loss ratio require-
ment, the insurer shall issue a dividend or credit against future premi-
ums for all policy holders with that policy form in an amount sufficient
to assure that the aggregate benefits paid in the previous calendar year
plus the amount of the dividends and credits shall equal [seventy-five]
EIGHTY-TWO percent of the aggregate premiums collected for the policy
form in the previous calendar year. The dividend or credit shall be
issued to each policy holder who had a policy which was in effect at any
time during the applicable year. The dividend or credit shall be
prorated based on the direct premiums earned for the applicable year
among all policy holders eligible to receive such dividend or credit. An
insurer shall make a reasonable effort to identify the current address
of, and issue dividends or credits to, former policy holders entitled to
the dividend or credit. An insurer shall, with respect to dividends or
credits to which former policy holders that the insurer is unable to
identify after a reasonable effort would otherwise be entitled, have the
option, as deemed acceptable by the superintendent, of prospectively
adjusting premium rates by the amount of such dividends or credits,
issuing the amount of such dividends or credits to existing policy hold-
ers, depositing the amount of such dividends or credits in the fund
established pursuant to section four thousand three hundred twenty-two-a
of this chapter, or utilizing any other method which offsets the amount
of such dividends or credits. All dividends and credits must be
distributed by September thirtieth of the year following the calendar
year in which the loss ratio requirements were not satisfied. The annual
report required by this paragraph shall include an insurer's calculation
of the dividends and credits, as well as an explanation of the insurer's
plan to issue dividends or credits. The instructions and format for
calculating and reporting loss ratios and issuing dividends or credits
shall be specified by the superintendent by regulation. Such regulations
shall include provisions for the distribution of a dividend or credit in
the event of cancellation or termination by a policy holder.
(3) ALL POLICY FORMS SUBJECT TO THIS SUBSECTION, OTHER THAN MEDICARE
SUPPLEMENTAL INSURANCE POLICY FORMS, ISSUED OR IN EFFECT DURING CALENDAR
YEAR TWO THOUSAND TEN SHALL BE SUBJECT TO A MINIMUM LOSS RATIO REQUIRE-
MENT OF EIGHTY-TWO PERCENT. INSURERS MAY USE THE ALTERNATE FILING PROCE-
DURE SET FORTH IN PARAGRAPH TWO OF THIS SUBSECTION TO ADJUST PREMIUM
RATES IN ORDER TO MEET THE REQUIRED MINIMUM LOSS RATIO FOR CALENDAR YEAR
TWO THOUSAND TEN. THE RATE FILING OR APPLICATION SHALL BE SUBMITTED NO
LATER THAN SEPTEMBER THIRTIETH, TWO THOUSAND TEN.
S 2. Section 4308 of the insurance law, subsection (b) as amended and
subsections (d), (e) and (f) as added by chapter 501 of the laws of
1992, paragraph 3 of subsection (c) as amended by chapter 520 of the
laws of 1999, subsections (g), (h), (i) and (j) as added by chapter 504

S. 8088 4 A. 11369

of the laws of 1995 and paragraph 2 of subsection (h) as amended by
chapter 237 of the laws of 2009, is amended to read as follows:
S 4308. Supervision of superintendent[; public hearings]. (a) No
corporation subject to the provisions of this article shall enter into
any contract unless and until it shall have filed with the superinten-
dent a copy of the contract or certificate and of all applications,
riders and endorsements for use in connection with the issuance or
renewal thereof, to be formally approved by him as conforming to the
applicable provisions of this article and not inconsistent with any
other provision of law applicable thereto. The superintendent shall,
within a reasonable time after the filing of any such form, notify the
corporation filing the same either of his approval or of his disapproval
of such form.
(b) No corporation subject to the provisions of this article shall
enter into any contract unless and until it shall have filed with the
superintendent a schedule of the premiums or, if appropriate, rating
formula from which premiums are determined, to be paid under the
contracts and shall have obtained the superintendent's approval thereof.
The superintendent may refuse such approval if he finds that such premi-
ums, or the premiums derived from the rating formula, are excessive,
inadequate or unfairly discriminatory, provided, however, the super-
intendent may also consider the financial condition of such corporation
in approving or disapproving any premium or rating formula. ANY ADJUST-
MENTS TO AN APPROVED SCHEDULE OF PREMIUMS OR TO THE APPROVED RATING
FORMULA FOR NON-COMMUNITY RATED CONTRACTS SHALL ALSO BE SUBJECT TO THE
APPROVAL OF THE SUPERINTENDENT PROVIDED, HOWEVER, SUCH ADJUSTMENTS SHALL
NOT BE SUBJECT TO THE REQUIREMENTS OF SUBSECTION (C) OF THIS SECTION.
Any premium or formula approved by the superintendent shall make
provision for such increase as may be necessary to meet the requirements
of a plan approved by the superintendent in the manner prescribed in
section four thousand three hundred ten of this article for restoration
of the statutory reserve fund required by such section. Notwithstanding
any other provision of law, the superintendent, as part of the rate
increase approval process, may defer, reduce or reject a rate increase
if, in the judgment of the superintendent, the salary increases for
senior level management executives employed at corporations subject to
the provisions of this article are excessive or unwarranted given the
financial condition or overall performance of such corporation. The
superintendent is authorized to promulgate rules and regulations which
the superintendent deems necessary to carry out such deferral, reduction
or rejection.
(c) (1) [Except for an application pursuant to subsection (f) of
section four thousand three hundred four of this article, no] AN
increase or decrease in premiums with respect to [individual] COMMUNITY
RATED contracts [issued pursuant to the provisions of such section]
shall NOT be approved by the superintendent unless it is in compliance
with the provisions of this subsection as well as other applicable
provisions of law.
(2) [Prior to any such filing or application by or on behalf of a
corporation for an increase or decrease in premiums for such contracts,
such corporation, when directed by the superintendent, shall conduct a
public hearing with respect to the terms of such filing or application.
Notice of such hearing shall be published on three successive days in at
least two newspapers having general circulation within the territory or
district wherein such corporation seeking approval of the filing is
authorized to do business. The date specified for the hearing shall be

S. 8088 5 A. 11369

not less than ten nor more than thirty days from the date of the first
publication of the hearing. The notice of hearing shall state the
purpose thereof, the time when and the place where the public hearing
will be held. The public hearing shall be held at a time and location
deemed by the superintendent to be most convenient to the greatest
number of persons affected by such filing. At such hearing any person
may be heard in favor of, or against, the terms of the filing or appli-
cation.
(3) Following the public hearing held pursuant to paragraph two of
this subsection, a transcript of the testimony therein shall be submit-
ted together with a rate filing or application, to the superintendent.
Upon receipt of such filing or application by or on behalf of a corpo-
ration, the superintendent shall order that a public hearing be held
with respect to the terms of such filing or application. Notice of such
hearing shall be published on three successive days in at least two
newspapers having general circulation within the territory or district
wherein such corporation seeking approval of the filing or application
is authorized to do business. For a corporation writing more than three
billion dollars in premiums as of December thirty-first, nineteen
hundred ninety-six and whose service territory is greater than ten coun-
ties, such notice is to be published in at least one newspaper having
general circulation in each county where persons in the service territo-
ry are affected by the proposed change. The date specified for the hear-
ing shall be not less than ten nor more than thirty days from the date
of the last publication of the hearing. The notice of hearing shall also
state the purpose thereof, the time when and the place where the public
hearing will be held. For those corporations writing more than three
billion dollars in premiums as of December thirty-first, nineteen
hundred ninety-six, and whose territory is greater than ten counties,
the notice of hearing shall also state the changes proposed, the
contracts to be affected and the time when such changes would take
effect. The notice of hearing shall state, in prominent display, a toll-
free telephone number of the insurance department that may be contacted
to receive additional information on the subject rate application. The
public hearing shall be held at a time and location deemed by the super-
intendent to be most convenient to the greatest number of persons
affected by such filing or application. A copy of such notice of hearing
shall be forwarded by the superintendent by registered or certified mail
to the principal address of the corporation seeking approval of such
filing or application. The hearing may be continued or adjourned from
day to day within the discretion of the superintendent. At such hearing
any person may be heard in favor of, or against, the terms of the filing
or application. After conclusion of the public hearing the superinten-
dent shall render a written decision determining whether the filing or
application shall become effective as filed, shall become effective as
modified, or shall be disapproved. If, subsequent to the hearing, but
prior to the issuing of the superintendent's written decision on a rate
increase request, the corporation increases its requested rate for any
contract by two percent or more, a re-hearing shall be held. The time,
location, and notice requirements for such re-hearing shall be deter-
mined by the superintendent.
(4)] A CORPORATION DESIRING TO INCREASE OR DECREASE PREMIUMS FOR ANY
CONTRACT SUBJECT TO THIS SUBSECTION SHALL SUBMIT A RATE FILING OR APPLI-
CATION TO THE SUPERINTENDENT. A CORPORATION SHALL SEND WRITTEN NOTICE
OF THE PROPOSED RATE ADJUSTMENT, INCLUDING THE SPECIFIC CHANGE
REQUESTED, TO EACH CONTRACT HOLDER AND SUBSCRIBER AFFECTED BY THE

S. 8088 6 A. 11369

ADJUSTMENT ON OR BEFORE THE DATE THE RATE FILING OR APPLICATION IS
SUBMITTED TO THE SUPERINTENDENT. THE NOTICE SHALL PROMINENTLY INCLUDE
MAILING AND WEBSITE ADDRESSES FOR BOTH THE INSURANCE DEPARTMENT AND THE
CORPORATION THROUGH WHICH A PERSON MAY, WITHIN THIRTY DAYS FROM THE DATE
THE RATE FILING OR APPLICATION IS SUBMITTED TO THE SUPERINTENDENT,
CONTACT THE INSURANCE DEPARTMENT OR CORPORATION TO RECEIVE ADDITIONAL
INFORMATION OR TO SUBMIT WRITTEN COMMENTS TO THE INSURANCE DEPARTMENT ON
THE RATE FILING OR APPLICATION. THE SUPERINTENDENT SHALL ESTABLISH A
PROCESS TO POST ON THE DEPARTMENT'S WEBSITE, IN A TIMELY MANNER, ALL
RELEVANT WRITTEN COMMENTS RECEIVED PERTAINING TO RATE FILINGS OR APPLI-
CATIONS. THE CORPORATION SHALL PROVIDE A COPY OF THE NOTICE TO THE
SUPERINTENDENT WITH THE RATE FILING OR APPLICATION. THE SUPERINTENDENT
SHALL IMMEDIATELY CAUSE THE NOTICE TO BE POSTED ON THE INSURANCE DEPART-
MENT'S WEBSITE. THE SUPERINTENDENT SHALL DETERMINE WHETHER THE FILING
OR APPLICATION SHALL BECOME EFFECTIVE AS FILED, SHALL BECOME EFFECTIVE
AS MODIFIED, OR SHALL BE DISAPPROVED. THE SUPERINTENDENT MAY MODIFY OR
DISAPPROVE THE RATE FILING OR APPLICATION IF THE SUPERINTENDENT FINDS
THAT THE PREMIUMS ARE UNREASONABLE, EXCESSIVE, INADEQUATE, OR UNFAIRLY
DISCRIMINATORY, AND MAY CONSIDER THE FINANCIAL CONDITION OF THE CORPO-
RATION IN APPROVING, MODIFYING OR DISAPPROVING ANY PREMIUM ADJUSTMENT.
THE DETERMINATION OF THE SUPERINTENDENT SHALL BE SUPPORTED BY SOUND
ACTUARIAL ASSUMPTIONS AND METHODS, AND SHALL BE RENDERED IN WRITING
BETWEEN THIRTY AND SIXTY DAYS FROM THE DATE THE RATE FILING OR APPLICA-
TION IS SUBMITTED TO THE SUPERINTENDENT. SHOULD THE SUPERINTENDENT
REQUIRE ADDITIONAL INFORMATION FROM THE CORPORATION IN ORDER TO MAKE A
DETERMINATION, THE SUPERINTENDENT SHALL REQUIRE THE CORPORATION TO
FURNISH SUCH INFORMATION, AND IN SUCH EVENT, THE SIXTY DAYS SHALL BE
TOLLED AND SHALL RESUME AS OF THE DATE THE CORPORATION FURNISHES THE
INFORMATION TO THE SUPERINTENDENT. IF THE SUPERINTENDENT REQUESTS ADDI-
TIONAL INFORMATION LESS THAN TEN DAYS FROM THE EXPIRATION OF THE SIXTY
DAYS (EXCLUSIVE OF TOLLING), THE SUPERINTENDENT MAY EXTEND THE SIXTY DAY
PERIOD AN ADDITIONAL TWENTY DAYS, TO MAKE A DETERMINATION. THE APPLICA-
TION OR RATE FILING WILL BE DEEMED APPROVED IF A DETERMINATION IS NOT
RENDERED WITHIN THE TIME ALLOTTED UNDER THIS SECTION. A CORPORATION
SHALL NOT IMPLEMENT A RATE ADJUSTMENT UNLESS THE CORPORATION PROVIDES AT
LEAST SIXTY DAYS ADVANCE WRITTEN NOTICE OF THE PREMIUM RATE ADJUSTMENT
APPROVED BY THE SUPERINTENDENT TO EACH CONTRACT HOLDER AND SUBSCRIBER
AFFECTED BY THE RATE ADJUSTMENT.
(3)(A) THE EXPECTED MINIMUM LOSS RATIO FOR A CONTRACT FORM SUBJECT TO
THIS SUBSECTION FOR WHICH A RATE FILING OR APPLICATION IS MADE PURSUANT
TO THIS PARAGRAPH, OTHER THAN A MEDICARE SUPPLEMENTAL INSURANCE
CONTRACT, OR, WITH THE APPROVAL OF THE SUPERINTENDENT, AN AGGREGATION OF
CONTRACT FORMS THAT ARE COMBINED INTO ONE COMMUNITY RATING EXPERIENCE
POOL AND RATED CONSISTENT WITH COMMUNITY RATING REQUIREMENTS, SHALL NOT
BE LESS THAN EIGHTY-TWO PERCENT. IN REVIEWING A RATE FILING OR APPLICA-
TION, THE SUPERINTENDENT MAY MODIFY THE EIGHTY-TWO PERCENT EXPECTED
MINIMUM LOSS RATIO REQUIREMENT IF THE SUPERINTENDENT DETERMINES THE
MODIFICATION TO BE IN THE INTERESTS OF THE PEOPLE OF THIS STATE OR IF
THE SUPERINTENDENT DETERMINES THAT A MODIFICATION IS NECESSARY TO MAIN-
TAIN INSURER SOLVENCY. NO LATER THAN JUNE THIRTIETH OF EACH YEAR, EVERY
CORPORATION SUBJECT TO THIS SUBPARAGRAPH SHALL ANNUALLY REPORT THE ACTU-
AL LOSS RATIO FOR THE PREVIOUS CALENDAR YEAR IN A FORMAT ACCEPTABLE TO
THE SUPERINTENDENT. IF AN EXPECTED LOSS RATIO IS NOT MET, THE SUPER-
INTENDENT MAY DIRECT THE CORPORATION TO TAKE CORRECTIVE ACTION, WHICH
MAY INCLUDE THE SUBMISSION OF A RATE FILING TO REDUCE FUTURE PREMIUMS,

S. 8088 7 A. 11369

OR TO ISSUE DIVIDENDS, PREMIUM REFUNDS OR CREDITS, OR ANY COMBINATION OF
THESE.
(B) THE EXPECTED MINIMUM LOSS RATIO FOR A MEDICARE SUPPLEMENTAL INSUR-
ANCE CONTRACT FORM SHALL NOT BE LESS THAN EIGHTY PERCENT. NO LATER THAN
MAY FIRST OF EACH YEAR, EVERY CORPORATION SUBJECT TO THIS SUBPARAGRAPH
SHALL ANNUALLY REPORT THE ACTUAL LOSS RATIO FOR EACH CONTRACT FORM
SUBJECT TO THIS SECTION FOR THE PREVIOUS CALENDAR YEAR IN A FORMAT
ACCEPTABLE TO THE SUPERINTENDENT. IN EACH CASE WHERE THE LOSS RATIO FOR
THE CONTRACT FORM FAILS TO COMPLY WITH THE EIGHTY PERCENT LOSS RATIO
REQUIREMENT, THE CORPORATION SHALL SUBMIT A CORRECTIVE ACTION PLAN TO
THE SUPERINTENDENT FOR ASSURING COMPLIANCE WITH THE APPLICABLE MINIMUM
LOSS RATIO STANDARD. THE CORRECTIVE ACTION PLAN SHALL BE SUBMITTED TO
THE SUPERINTENDENT WITHIN SIXTY DAYS OF THE CORPORATION'S SUBMISSION OF
THE ANNUAL REPORT REQUIRED BY THIS SUBPARAGRAPH. THE CORPORATION'S PLAN
MAY UTILIZE PREMIUM REFUNDS OR CREDITS, SUBJECT TO THE APPROVAL OF THE
SUPERINTENDENT.
(4) In case of conflict between this subsection and any other
provision of law, this subsection shall prevail.
(d) The superintendent shall order an independent management and
financial audit of corporations subject to the provisions of this arti-
cle with a combined premium volume exceeding two billion dollars annual-
ly in order to develop a detailed understanding of such corporation's
financial status and to determine the viability of such corporation's
products. Such audit shall be performed by an organization upon
submission of a program plan in response to a request for proposal
approved by the superintendent in consultation with the commissioner of
health and the state comptroller. Such audit shall not be performed by
any organization that has in any way performed or furnished services of
any kind to the corporation within the past five years, unless it is
adequately demonstrated that such services would not compromise that
organization's performance and objectivity. The audit shall be completed
and a report submitted by May first, nineteen hundred ninety-three to
the superintendent, the commissioner of health, and the chairs of the
senate and assembly committees on health and insurance. The scope of the
audit shall include, but not be limited to, financial and competitive
position, corporate structure and governance, organization and manage-
ment, strategic direction, rate adequacy, and the regulatory and compet-
itive environment in the state of New York. Specifically, the audit
shall include, but not be limited to:
(i) determining the corporation's financial and market position,
including its reserves, trends in membership, market share, and profit-
ability by market segment;
(ii) evaluating the corporation's product offerings with respect to
market requirements and trends, the corporation's responses to the New
York health care market, and its management of medical claims costs;
(iii) assessing the effectiveness of the organizational and management
structure and performance, including, but not limited to, possible
improvement in the size, structure, composition and operation of the
board of directors, productivity improvement, information systems,
management development, personnel practices, mix and level of skills,
personnel turnover, investment practices and rate of return upon invest-
ment activities;
(iv) analyzing the corporation's strategic directions, its adequacy to
meet competitive, market, and existing regulatory trends, including an
evaluation of the use of brokers in marketing products, and the impact

S. 8088 8 A. 11369

of those strategies on the corporation's future financial performance
and on the health care system of New York;
(v) evaluating the adequacy of rates for existing products, partic-
ularly (but not limited to) small group, medicare supplemental, and
direct payment to identify areas that may need immediate remedial atten-
tion;
(vi) identifying any changes to the regulatory and legislative envi-
ronment that may need to be made to ensure that the corporation can
continue to be financially viable and competitive;
(vii) identifying and assessing specific transactions such as the
procurement of reinsurance, sale of real property and the sale of future
investment income to improve the financial condition of the corporation;
and
(viii) evaluating and identifying possible improvements in the corpo-
ration's managed care strategies, operations and claims handling.
(e) Notwithstanding any other provision of law, the superintendent
shall have the power to require independent management and financial
audits of corporations subject to the provisions of this article whenev-
er in the judgment of the superintendent, losses sustained by a corpo-
ration jeopardize its ability to provide meaningful coverage at afforda-
ble rates or when such audit would be necessary to protect the interests
of subscribers. The audit shall include, but not be limited to, an
investigation of the corporation's provision of benefits to senior citi-
zens, individual and family, and small group and small business
subscribers in relation to the needs of those subscribers. The audit
shall also include an evaluation of the efficiency of the corporation's
management, particularly with respect to lines of business which are
experiencing losses. In every case in which the superintendent chooses
to require an audit provided for in this subsection, the superintendent
shall have the authority to select the auditor. Any costs incurred as a
result of the operation of this subsection shall be assessed on all
domestic insurers in the same manner as provided for in section three
hundred thirty-two of this chapter.
(f) The results of any audit conducted pursuant to subsections (d) and
(e) of this section shall be provided to the corporation and each member
of its board of directors. The superintendent shall have the authority
to direct the corporation in writing to implement any recommendations
resulting from the audit that the superintendent finds to be necessary
and reasonable; provided, however, that the superintendent shall first
consider any written response submitted by the corporation or the board
of directors prior to making such finding. Upon any application for a
rate adjustment by the corporation, the superintendent shall review the
corporation's compliance with the directions and recommendations made
previously by the superintendent, as a result of the most recently
completed management or financial audit and shall include such findings
in any written decision concerning such application.
(g)(1) [Beginning January first, nineteen hundred ninety-six] UNTIL
SEPTEMBER THIRTIETH, TWO THOUSAND TEN, as an alternate procedure to the
requirements of subsection (c) of this section, a corporation subject to
the provisions of this article desiring to increase or decrease premiums
for any contract subject to this section may instead submit a rate
filing or application to the superintendent and such application or
filing shall be deemed approved, provided that (A) the anticipated
incurred loss ratio for a contract form shall not be less than [eighty-
five] EIGHTY-TWO percent for individual direct payment contracts or
[seventy-five] EIGHTY-TWO percent for small group and small group remit-

S. 8088 9 A. 11369

tance contracts, nor, except in the case of individual direct payment
contracts with a loss ratio of greater than one hundred five percent
during nineteen hundred ninety-four, shall the loss ratio for any direct
payment, group or group remittance contract be more than one hundred
five percent of the anticipated earned premium, and (B) the corporation
submits, as part of such filing, a certification by a member of the
American Academy of Actuaries or other individual acceptable to the
superintendent that that corporation is in compliance with the
provisions of this subsection, based upon that person's examination,
including a review of the appropriate records and of the actuarial
assumptions and methods used by the corporation in establishing premium
rates for contracts subject to this section. A CORPORATION SHALL NOT
UTILIZE THE ALTERNATE PROCEDURE PURSUANT TO THIS SUBSECTION TO IMPLEMENT
A CHANGE IN RATES TO BE EFFECTIVE ON OR AFTER OCTOBER FIRST, TWO THOU-
SAND TEN. For purposes of this section, a small group is any group whose
contract is subject to the requirements of section forty-three hundred
seventeen of this article.
(2) Prior to January first, two thousand, no rate increase or decrease
may be deemed approved under this subsection if that increase or
decrease, together with any other rate increases or decreases imposed on
the same contract form, would cause the aggregate rate increase or
decrease for that contract form to exceed ten percent during any contin-
uous twelve month period. No rate increase may be imposed PURSUANT TO
THIS SUBSECTION unless at least thirty days advance written notice of
such increase has been provided to each contract holder and subscriber.
(h)(1) Each calendar year, a corporation subject to the provisions of
this article shall return, in the form of aggregate benefits incurred
for each contract form filed pursuant to the alternate procedure set
forth in subsection (g) of this section, at least [eighty-five] EIGHTY-
TWO percent for individual direct payment contracts or [seventy-five]
EIGHTY-TWO percent for small group and small group remittance contracts,
but, except in the case of individual direct payment contracts with a
loss ratio of greater than one hundred five percent in nineteen hundred
ninety-four, for any direct payment, group or group remittance contract,
not in excess of one hundred five percent of the aggregate premiums
earned for the contract form during that calendar year. Corporations
subject to the provisions of this article shall annually report, no
later than [May first] JUNE THIRTIETH of each year, the loss ratio
calculated pursuant to this subsection for each such contract form for
the previous calendar year.
(2) In each case where the loss ratio for a contract form fails to
comply with the [eighty-five] EIGHTY-TWO percent minimum loss ratio
requirement for individual direct payment contracts, or the [seventy-
five] EIGHTY-TWO percent minimum loss ratio requirement for small group
and small group remittance contracts, as set forth in paragraph one of
this subsection, the corporation shall issue a dividend or credit
against future premiums for all contract holders with that contract form
in an amount sufficient to assure that the aggregate benefits incurred
in the previous calendar year plus the amount of the dividends and cred-
its shall equal no less than [eighty-five] EIGHTY-TWO percent for indi-
vidual direct payment contracts, or [seventy-five] EIGHTY-TWO percent
for small group and small group remittance contracts, of the aggregate
premiums earned for the contract form in the previous calendar year. The
dividend or credit shall be issued to each contract holder or subscriber
who had a contract that was in effect at any time during the applicable
year. The dividend or credit shall be prorated based on the direct

S. 8088 10 A. 11369

premiums earned for the applicable year among all contract holders or
subscribers eligible to receive such dividend or credit. A corporation
shall make a reasonable effort to identify the current address of, and
issue dividends or credits to, former contract holders or subscribers
entitled to the dividend or credit. A corporation shall, with respect to
dividends or credits to which former contract holders that the corpo-
ration is unable to identify after a reasonable effort would otherwise
be entitled, have the option, as deemed acceptable by the superinten-
dent, of prospectively adjusting premium rates by the amount of such
dividends or credits, issuing the amount of such dividends or credits to
existing contract holders, depositing the amount of such dividends or
credits in the fund established pursuant to section four thousand three
hundred twenty-two-a of this article, or utilizing any other method
which offsets the amount of such dividends or credits. All dividends and
credits must be distributed by September thirtieth of the year following
the calendar year in which the loss ratio requirements were not satis-
fied. The annual report required by paragraph one of this subsection
shall include a corporation's calculation of the dividends and credits,
as well as an explanation of the corporation's plan to issue dividends
or credits. The instructions and format for calculating and reporting
loss ratios and issuing dividends or credits shall be specified by the
superintendent by regulation. Such regulations shall include provisions
for the distribution of a dividend or credit in the event of cancella-
tion or termination by a contract holder or subscriber.
(3) In each case where the loss ratio for a contract form fails to
comply with the one hundred five percent maximum loss ratio requirement
of paragraph one of this subsection, the corporation shall institute a
premium rate increase in an amount sufficient to assure that the aggre-
gate benefits incurred in the previous calendar year shall equal no more
than one hundred five percent of the sum of the aggregate premiums
earned for the contract form in the previous calendar year and the
aggregate premium rate increase. The rate increase shall be applied to
each contract that was in effect as of December thirty-first of the
applicable year and remains in effect as of the date the rate increase
is imposed. All rate increases must be imposed by September thirtieth of
the year following the calendar year in which the loss ratio require-
ments were not satisfied. The annual report required by paragraph one of
this subsection shall include a corporation's calculation of the premium
rate increase, as well as an explanation of the corporation's plan to
implement the rate increase. The instructions and format for calculating
and reporting loss ratios and implementing rate increases shall be spec-
ified by the superintendent by regulation.
(i) The alternate procedure described in subsections (g) and (h) of
this section shall apply to individual direct payment contracts issued
pursuant to sections four thousand three hundred twenty-one and four
thousand three hundred twenty-two of this article on and after January
first, nineteen hundred ninety-seven. SUCH ALTERNATE PROCEDURE SHALL NOT
BE UTILIZED TO IMPLEMENT A CHANGE IN RATES TO BE EFFECTIVE ON OR AFTER
OCTOBER FIRST, TWO THOUSAND TEN.
(j) [The eighty-five percent minimum loss ratio for individual direct
payment contracts described in subsections (g) and (h) of this section
shall be reduced to eighty-two and one-half percent as of January first,
nineteen hundred ninety-seven and shall be further reduced to eighty
percent as of January first, nineteen hundred ninety-eight and thereaft-
er. The refund or credit requirements for failure to meet minimum loss
ratios will continue, but at these reduced percentages.] ALL COMMUNITY

S. 8088 11 A. 11369

RATED CONTRACTS, OTHER THAN MEDICARE SUPPLEMENTAL INSURANCE CONTRACTS,
ISSUED OR IN EFFECT DURING CALENDAR YEAR TWO THOUSAND TEN SHALL BE
SUBJECT TO A MINIMUM LOSS RATIO REQUIREMENT OF EIGHTY-TWO PERCENT.
CORPORATIONS MAY USE THE ALTERNATE PROCEDURE SET FORTH IN SUBSECTION (G)
OF THIS SECTION TO ADJUST PREMIUM RATES IN ORDER TO MEET THE REQUIRED
MINIMUM LOSS RATIO FOR CALENDAR YEAR TWO THOUSAND TEN. THE RATE FILING
OR APPLICATION SHALL BE SUBMITTED NO LATER THAN SEPTEMBER THIRTIETH, TWO
THOUSAND TEN.
S 3. If any clause, sentence, paragraph, section or part of this act
shall be adjudged by any court of competent jurisdiction to be invalid,
the judgment shall not affect, impair or invalidate the remainder there-
of, but shall be confined in its operation to the clause, sentence,
paragraph, section or part thereof directly involved in the controversy
in which such judgment shall have been rendered.
S 4. This act shall take effect immediately.

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